Log In | Register
NEW YORK — Tiffany & Co. said Friday that its second-quarter profit fell but beat analyst expectations as its steep sales declines moderated, providing a sparkle of hope amid the moribund luxury market.
The luxury retailer also raised its full-year earnings guidance, sending shares up nearly 9 percent by midday.
"While economic and retail conditions remain challenging, we were encouraged to see many stores achieving either smaller year-over-year rates of sales declines or modest sales growth compared with the past two quarters," Chairman and CEO Michael Kowalski said in a statement.
The luxury sector has seen freefalling sales, as consumers cut back on higher-ticket items amid the recession. Neiman Marcus' sales declined 24 percent in the most recent quarter. Saks Inc.'s fell 15 percent.
But there have been some small signs of improvement: last month Coach Inc. said sales of full-price handbags were improving, though still weak. Tiffany's results are another sign, an analyst said.
"Tiffany results show high-end jewelry trends are setting a bottom," said Jefferies & Co. analyst Randal J. Konik.
The company known for its signature blue box earned $56.8 million, or 46 cents per share, for the period ended July 31, down 30 percent from $80.8 million, or 63 cents per share, a year ago. Excluding a benefit of 7 cents per share related to loan recovery and tax reserve adjustments, net income was 39 cents per share.
Analysts forecast profit of 33 cents per share, according to a Thomson Reuters survey.
Sales dropped 16 percent to $612.5 million from $729.6 million, but still topped Wall Street's estimate of $602.1 million. That was a bit better than the 22 percent and 20 percent drops in the previous two quarters.
As in previous quarters, sales of jewelry price at more than $50,000 was weakest, while lower-priced items such as silver and gold fashion jewelry fared better. Tiffany has not lowered prices but added more items to the mix at lower prices. Its new collection of key pendants, for example, starts at $150 and goes up to $15,000.
Sales at U.S. stores open at least a year dropped 27 percent. At its flagship New York store, sales were off 30 percent. Combined Internet and catalog sales for the U.S. fared a bit better, posting an 8 percent decline.
"We're pleased that sales trends in the first half have been moving in the direction we've planned and believe the picture will brighten further in the second half when we compare to the steep sales declines last year," said Mark Aaron, vice president of investor relations.
The retailer had smaller dropoffs overseas, with sales for the Asia-Pacific region dipping 1 percent and European sales down 4 percent. The lower yen helped sales.
Japan sales were weak but outside of that retail sales rose 14 percent, as same-store sales rose 5 percent.
Like many retailers trying to navigate through the economic downturn, Tiffany has tightly controlled inventory and cut costs.
Konik said the New York company is "doing an exceptional job with cost and inventory control and new product development."
Tiffany now expects 2009 earnings from continuing operations of $1.65 to $1.75 per share, above analyst expectations and up from a prior outlook of $1.50 to $1.60 per share.
Still, "our full year sales forecast assumes no meaningful change in economic conditions from the current environment," Aaron said. "So we have not changed our sales and earnings expectations for the second half of the year, and I should also add that we have no plans for store closings."
Shares rose $2.86, or 8.5 percent, to $36.60 during midday trading.
___
AP Retail Writer Michelle Chapman in New York contributed to this report.
